An etsy seller handbook blog from 2012 says the formula for fairly pricing one's handmade work should be: Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail.
Now, that's nice, but I honestly doubt anyone would ever buy anything at that price. For instance, I recently made a baby's hat in light blue and sparkly white cotton yarn. The balls of yarn were $3.29 each before tax. It took me about 1.5 hours to make, and let's assume I pay myself $10 an hour. My expenses included $2.99 for the pattern on Ravelry, as well as gas to buy the yarn, and a crochet hook in the proper size.
So going by this formula, my materials cost $6.58, $15 in labor, $2.99 plus $4 for the crochet hook is $6.99, and I'll eat the gas money since the store was in town. Expenses also includes packaging to send the item, business cards, invoices and notes, but I don't charge anything for this at this time.
Profit is harder to pin down. The etsy blog I consulted said it's dependent upon the product in question. So let's lowball it and say $5 in profit - enough to buy almost two more balls of the same yarn.
At this rate, that's $6.58 + $15 + $6.99 + $5 = $33.57 x 2 = $67.14.
No one I know would pay $67.14 for a baby hat. Not a single person. Is this truly a fair rate for my work? I charged about $28 dollars for the hat, because I looked at the other similar items on Etsy and figured out that seems to be what most people are charging. Does that mean we're all undervaluing our work?
I feel deeply uncomfortable charging half of what this formula says my work is worth. But I do enjoy making handmade things people like, and I'd like to continue to do so. On the other hand, I cannot imagine anyone paying nearly $70 for a baby hat, handmade be damned.
So I guess it's a matter of finding a middle ground between making a profit and making sales in a saturated market.
I'm interested to know what others think about this.
